The Best Investment Manager's Guide to Hedge Funds and Market Trends in 2021
In a recent note by Barclays strategists, it has been revealed that hedge funds are no longer buying dips ahead of macroeconomic catalysts. While there was some re-grossing in equity markets last month, discretionary exposure to equities has not returned to pre-de-risking levels. Long-only funds are rebuilding their positions, but their equity exposure remains low.
Global macro and multi-strategy hedge funds were buyers during the summer risk-off period but have paused since then. Near-term risks like seasonality and uncertainty around US elections are keeping investors on the sidelines. However, Barclays believes that equity positioning is not overly extended, and there is potential for equities to become more attractive towards the end of the year, especially after the US elections.
Despite equities hitting new highs, macroeconomic and earnings fundamentals remain strong. There is a growing expectation of a 'Goldilocks' scenario, supported by strong US macroeconomic and labor data, easing inflation, and the Federal Reserve's rate cut. The US job market showed strength in September, easing concerns about the economy.
On the other hand, long bond positioning seems extended, indicating skepticism among bond investors about the economic outlook. The policy divergence between the Bank of Japan and the Federal Reserve has led speculative investors to become bullish on the Japanese yen.
In conclusion, while there are near-term risks in the market, the overall outlook remains positive for equities. Investors should keep an eye on the US elections and potential market fluctuations but remain optimistic about the long-term prospects of the market. Stay informed, stay agile, and make informed decisions to navigate the ever-changing landscape of the financial markets.